State Taxes and Location Decisions

As I just stressed on a CNBC debate, they’re a lot less connected than the typical anti-tax talking point would lead you to believe.

The claim was that taxes are driving millions from their high-tax states to low tax havens. The evidence, as I emphasized, says otherwise.

This is more Laffer curve fairy dust–in fact, Laffer relocated his family from CA to TN to avoid taxes. But–and Art is a good old buddy of mine–he’s…um…unusual. Most people don’t have that same response function so you know what happens when states cut taxes? They lose revenues.

Update: Steve Roth at Angry Bear does nice work on this silliness. (H/t: rjs)

8 comments in reply to "State Taxes and Location Decisions"

Some of my CPA friends (and me) have noticed a new pattern developing among the small and medium business crowd, particularly in the rustbelt.

Instead of selling out or passing the business to the kids at 60 – 70, many are selling out much earlier and moving south.

Weather or taxes? Based on my work, both. I am mostly retired from the tax business, but send more returns to Florida addresses than to Ohio or Michigan (small sample of course).

I can say to a certainty that the Ohio estate tax has caused many to move south, perhaps earlier than they might have in the past (the tax goes away 1/1/13). I know, I was at the table and gave them the advice.

Another trend is that for some the wealth comes much younger, at an age when taxes in general and estate taxes in particular are of less concern, so maybe those are the high earners who are not likely to move.

Better weather, lower taxes, Internet and cell phone on the boat, why stay in the north?

“If this schmuck is moving his company’s headquarters out of Buffalo for personal greed reasons, it ought to be made clear to him that he is not welcomed back. That income tax he’s complaining about? It paid for the education ecosystem and context in which Greatbatch developed his devices. You can’t have the one without the other. Poster child for what’s wrong with the 1% as they take from the rest of us and then turn around and stab us in the back.”